Automated price formula for fuels awaits PM's approval

• Octane currently Tk21 pricier per litre than diesel
• APS aims to adjust prices based on the global market
• Operational costs, taxes, BPC's margin also to be considered
• APS awaiting final approval from the PM's office

Under the Automatic Pricing Structure (APS), the price of octane will be Tk10 more per litre than the price of diesel, according to a notification issued by the Bangladesh Petroleum Corporation (BPC) on Thursday.

The retail price of 1 litre octane is currently Tk21 higher than that of diesel. The APS will ensure at least a Tk10 price gap between diesel and octane, with the latter being the higher priced.

The notification, titled "Automatic Fuel Oil Pricing Guidelines" stated that the prices of all petroleum fuels – petrol, diesel, octane, kerosene, furnace oil, jet fuel, and marine fuels – will be set automatically based on the international market price.

It said octane and petrol are used in the country in large quantities in vehicles, hence their price is always kept higher than diesel as a luxury item.

The guidelines include details of the APS, international price, moving average price, premium, operational expenses, financing, administrative and maintenance expenses, trade VAT, freight pool, dealers commission and transportation, and development fund and company margin.

The APS will include the element "α" (alpha) factor for setting the price of octane to ensure that the difference between octane and diesel is at least Tk10 per litre at the time of price determination.

Currently, diesel and kerosene are being sold at Tk109 per litre, octane at Tk130 and petrol at Tk125 in the domestic market. On the other hand, unrefined fuel oil is currently being sold on the international market at $79 to $83 per barrel.

The International Monetary Fund (IMF) had set a condition for the implementation of the APS since last September for $4.7 billion loans. To fulfil the condition of the IMF, the government took the initiative to regularly adjust the prices of fuel oil including diesel, petrol and octane in line with the global market.

However, Energy and Mineral Resources Division Secretary Md Nurul Alam said it will not be effective starting Friday.

"Since we have not yet received the prime minister's approval to make the guideline effective, we have to wait for some more days. We hope to get the PM's approval soon and will bring it into effect within 10-12 days," he told UNB.

The fuel pricing guidelines, however, giving an example of its effectiveness, stated that if it is planned to be made effective from 1 April, the prices of fuels for one month in the international market from 21 February to 20 March have to be taken into consideration to set an average price and then set the price for April.

Regarding such contradictory instructions in the guideline, the energy secretary said that such an automated pricing system is new in Bangladesh. So, the ministry itself is in some confusion. 

"We will sit with the BPC to remove all confusion and make the guideline clear to all," he said.

In case of setting a price for any of the petroleum fuels, all the expenses, including the international market price, import tax, advance income tax and VAT, operational expense, finance, administrative and maintenance cost, the BPC's margins, VAT, and sale and distribution costs will be taken into account and then set a price.

An official at the Energy Division said the government wants to keep the octane price higher than diesel, however, there is a concern that the price of octane might fall below the price of diesel as soon as the automated pricing structure is effective, reports UNB.